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Key Takeaways

Cetus is a protocol for decentralized exchanges and liquidity systems. It’s built on the Sui and Aptos blockchains.

Cetus’ mission is to build a flexible and reliable liquidity network that makes trading easier and more efficient for DeFi users.

The Cetus protocol adopts a concentrated liquidity market maker (CLMM) model that can enhance capital efficiency by allowing liquidity providers to choose a narrower price range for their positions.

What Is Cetus?

Cetus is a decentralized exchange (DEX) and concentrated liquidity protocol built on the Sui and Aptos blockchains. Its main goal is to make trading smoother and easier for everyone by creating a flexible and strong network for market liquidity. 

Cetus also aims to give decentralized finance (DeFi) users a top-notch trading experience and make liquidity use more efficient across the Web3 space.

Key Features of Cetus

Permissionless

Cetus allows anyone, or any app, to use its core tools and functions freely. For example, users can use Cetus to create new trading pools or set up custom liquidity-related services. No special permissions are needed to get started.

Programmable

Cetus is a flexible liquidity protocol based on a liquidity model known as Concentrated Liquidity Market Marker (CLMM). Users can set up all kinds of trading strategies, including more complex ones that are more commonly found on centralized exchanges. The CLMM model also allows liquidity providers to maximize their capital efficiency.

Composability

Cetus is built with integration in mind, offering “Liquidity as a Service.” This means developers can easily tap into Cetus’s liquidity for their own services, like creating vaults, derivatives, or leveraged farming products. Cetus’s software tools also allow new projects to quickly set up trading or swapping interfaces on their own pages.

Sustainability

The Cetus ecosystem uses a double-token model to ensure the long-term sustainability of the protocol. Such a model is designed to offer long-term rewards for those who contribute and actively participate in the network activities. 

CETUS is the main native token and xCETUS is a liquid staking token (LST) that represents staked CETUS.

Concentrated Liquidity Market Maker (CLMM)

In a standard automated market maker (AMM) model, liquidity is spread evenly across the whole price range. However, this often leaves most of the liquidity unused, especially in stablecoin pools where prices stay relatively stable.

In the concentrated liquidity market maker (CLMM) model, liquidity providers (LPs) can choose a narrower price range where trading activity is high, enabling them to earn more fees by putting their liquidity to better use.

In a CLMM system, each price range an LP chooses is called a position, and providers can set multiple positions within a liquidity pool to match their trading strategies. 

When the market price moves outside a position’s range, that liquidity becomes inactive, meaning it stops earning fees until the price moves back within the range. This setup gives LPs flexibility to adjust their strategies based on market trends, possibly maximizing their returns by targeting active price zones.

Why Did Cetus Choose Sui and Aptos?

Cetus operates on the Sui and Aptos blockchain networks. 

Sui is designed for high-speed transactions and instant settlements, making it great for apps that need quick responses. Its unique architecture also allows for creative new features in the Web3 space.

Aptos is a new blockchain with ambitions for speed, scalability, and resilience. As it grows, Cetus plans to be a key part of Aptos’s ecosystem, helping build a more efficient network.

What Can Liquidity Providers Earn on Cetus?

Liquidity providers on Cetus can earn incentives in a few different ways:

Transaction fees: Providers can earn fees based on active price ranges where their liquidity is used in trades. This is often LP’s primary method of earning.

Liquidity mining: LPs may get extra rewards based on their positions when collecting transaction fees in specific pools and price ranges. Liquidity mining generates specific NFTs that represent the position of liquidity providers.

Loyalty programs: Active participants may get extra incentives through loyalty programs like liquidity lockups and leaderboard events.

Cetus Tokens

Cetus has two tokens: CETUS and xCETUS. 

CETUS is the main token of the Cetus Protocol, designed as an interoperable token to be used as a medium of exchange within the network. Users can earn CETUS through liquidity mining.

xCETUS is a non-transferable escrowed token that represents staked CETUS. Users can participate in the governance system of the Cetus network according to their voting power (defined by xCETUS holdings).

Closing Thoughts

Cetus is an innovative DEX on Sui and Aptos that adopts the CLMM model. Cetus aims to simplify trading by building a flexible and powerful liquidity network with tools that can provide a smooth trading experience and efficient liquidity use for DeFi users.

Further Reading

What Is a Decentralized Exchange (DEX)?

What Is Liquid Staking?

What Is an Automated Market Maker (AMM)?

Disclaimer: This content is presented to you on an “as is” basis for general information and educational purposes only, without representation or warranty of any kind. It should not be construed as financial, legal or other professional advice, nor is it intended to recommend the purchase of any specific product or service. You should seek your own advice from appropriate professional advisors. Where the article is contributed by a third party contributor, please note that those views expressed belong to the third party contributor, and do not necessarily reflect those of Binance Academy. Please read our full disclaimer here for further details. Digital asset prices can be volatile. The value of your investment may go down or up and you may not get back the amount invested. You are solely responsible for your investment decisions and Binance Academy is not liable for any losses you may incur. This material should not be construed as financial, legal or other professional advice. For more information, see our Terms of Use and Risk Warning.

Key Takeaways

In crypto, an airdrop is a common marketing strategy used by projects to distribute free tokens to users, typically as a way to increase awareness and encourage adoption.

Airdrop scams are fraudulent schemes in the crypto space that lure users with promises of free tokens or coins, aiming to steal their crypto holdings.

This article covers what airdrop scams are, how they usually operate, and how you can protect yourself and your assets from scammers.

Introduction

In recent years, airdrops have emerged as a widely used marketing strategy for cryptocurrency projects to distribute their tokens to potential users and investors. However, with the rise in airdrop popularity, there was also a significant increase in the number of airdrop scams. In this article, we will delve into what airdrop scams are, how they operate, how they look, and most importantly, how you can protect yourself and your crypto assets.

What Are Airdrop Scams?

Airdrop scams refer to fraudulent schemes designed to deceive cryptocurrency users by offering fake airdrops – supposed giveaways of tokens or coins. These scams exploit the allure of free tokens to trick beginners and unsuspecting individuals into connecting their crypto wallets to malicious websites, transferring assets to fraudsters, or disclosing sensitive information.

How Airdrop Scams Work

Most airdrop scams will involve some sort of phishing technique that lure users into malicious websites. Let’s go through some common methods.

Fake airdrop promotion

Scammers set up phishing websites mimicking legitimate airdrop and promote it through various channels, including social media, email, and messaging platforms. Their goal is to trick users into revealing their sensitive information or connecting their crypto wallets. 

In other words, they lure users by promising free tokens in exchange for participating in the airdrop. Once users express interest, scammers may request personal information, wallet addresses, or even private keys under the guise of claiming the airdrop. However, instead of receiving tokens, victims may find their wallets drained or compromised.

Impersonation

Scammers impersonate well-known cryptocurrency exchanges or influencers to gain credibility and lure victims into participating in fraudulent airdrops. Scammers may also hack into legitimate accounts to take advantage of their followers.

Unsolicited crypto or NFTs (non-fungible tokens)

Be careful if you find assets in your wallet that you never bought or asked for. Scammers may distribute unsolicited crypto or NFTs to users’ wallets in an attempt to promote malicious websites. Typically, users can find the scammer’s website when checking their wallets on a block explorer or as part of an NFT image that suddenly showed up in their wallets.

Note that victims may also lose funds when trying to sell or transfer tokens received from scammers. If you receive suspicious tokens, do not try to sell or interact with them.

Identifying Airdrop Scams

Here are some red flags to watch out for when evaluating potential airdrops:

1. Unrealistic promises: Beware of airdrops promising exorbitant rewards or returns without any effort or investment on your part.

2. Suspicious requests: Exercise caution if an airdrop requires you to connect your wallet to a website or to disclose sensitive information such as private keys, recovery phrases, or personal details.

3. Lack of transparency: Scrutinize airdrop projects lacking clear documentation, whitepapers, or reputable team members.

4. Phishing attempts: Stay vigilant against phishing tactics, including fake websites, emails, and social media accounts impersonating legitimate projects or influencers.

Examples of airdrop scams

In the example below, the victim receives an NFT that contains the scammer’s website embedded in the token name.

Below are examples of scam NFTs distributed to Solana users, inviting them to participate in fake airdrops. This happened right after the legitimate Jupiter airdrop.

How to Avoid Airdrop Scams

Use burner wallets

A burner wallet is a crypto wallet you create specifically for a single-use, making them suitable for riskier interactions. The idea is to only use it with a small amount of crypto, so you can limit your losses if something goes wrong.

Conduct thorough research

Before participating in any airdrop, conduct extensive research on the project, its team members, and its objectives. Verify the legitimacy of the airdrop by checking official sources, such as the project's website, social media channels, and reputable cryptocurrency forums.

Exercise caution with personal information

Never disclose your private keys, recovery phrases, or other sensitive information to unknown or untrusted parties. Legitimate airdrops do not require such information to participate. Be wary of any requests for personal data, as they may be phishing attempts by scammers.

Verify authenticity

Double-check the authenticity of airdrop announcements and promotions through official channels. Look for signs of legitimacy, such as official branding, clear communication channels, and endorsements from reputable sources within the cryptocurrency community.

Stay informed and alert

Stay informed about common airdrop scam tactics and remain vigilant against potential threats. Keep yourself informed of the latest developments in the cryptocurrency space and learn about the best practices for protecting your assets.

Reporting and Taking Action

Report suspicious activity

If you encounter a suspected airdrop scam or fraudulent activity, report it to the relevant authorities, such as cryptocurrency exchanges, regulatory bodies, or law enforcement agencies. By reporting scams promptly, you can help prevent further harm to yourself and others in the community.

Secure your assets

In the event of a suspected compromise or security breach:

Take immediate action to secure your assets.

Transfer your funds to a secure wallet or exchange with robust security measures in place.

Consider enabling additional security features, such as two-factor authentication (2FA), to protect your accounts from unauthorized access.

Conclusion

Airdrop scams pose a significant threat to cryptocurrency users, but with awareness, vigilance, and proactive measures, they can be effectively mitigated. By understanding the tactics used by scammers, identifying red flags, and adopting best practices for safeguarding your assets, you can navigate the cryptocurrency landscape with more confidence and peace of mind. Remember, the key to avoiding airdrop scams lies in staying informed, exercising caution, and trusting reputable sources.

Further Reading

5 Tips to Secure Your Cryptocurrency Holdings

What Is Phishing and How Does It Work?

Common Bitcoin Scams and How to Avoid Them

Disclaimer: This content is presented to you on an “as is” basis for general information and educational purposes only, without representation or warranty of any kind. It should not be construed as financial, legal or other professional advice, nor is it intended to recommend the purchase of any specific product or service. You should seek your own advice from appropriate professional advisors. Where the article is contributed by a third party contributor, please note that those views expressed belong to the third party contributor, and do not necessarily reflect those of Binance Academy. Please read our full disclaimer here for further details. Digital asset prices can be volatile. The value of your investment may go down or up and you may not get back the amount invested. You are solely responsible for your investment decisions and Binance Academy is not liable for any losses you may incur. This material should not be construed as financial, legal or other professional advice. For more information, see our Terms of Use and Risk Warning.